Banking Laws - DIZON CHAPTER 1 I. DECLARED Policy of the State (Sec.

2, GBL) - The State recognizes the vital role of banks providing an environment conducive to the sustained development of the national economy and the fiduciary nature of banking that requires high standards of integrity and performance. In furtherance thereof, the State shall promote and maintain a stable and efficient banking and financial system that is globally competitive, dynamic and responsive to the demands of a developing economy. II. Definition of Banks (Sec. 3.1, GBL) - "Banks" shall refer to entities engaged in the lending of funds obtained in the form of deposits. Note: Banks may engage in other activities allowed by law. III. Nature of Banking Business A. Debtor-Creditor Relationship The relationship existing between a depositor and bank is that of a creditor and debtor. B. Fiduciary Duty 1. Simex Intl., Inc. vs. CA: The State recognizes the fiduciary nature of banking that requires high standards of integrity and performance. Banks are required to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship. 2. This banks obligation is deemed written into every deposit agreement between a bank and its depositor. C. Not A Trust Agreement 1. The fiduciary nature of bank-depositor relationship does NOT convert the contract between the bank and its depositors FROM a SIMPLE LOAN TO a TRUST AGREEMENT. This is because Banks do not accept deposits to enrich depositors but to earn money for themselves. 2. Failure by the bank to pay to pay the depositor is failure to pay a simple loan, and NOT a breach of trust. D. Indispensable Institution 1. Banks is an indispensable institution in the modern world and plays vital role in the economic life of every citizen. People have come to regard them with respect, gratitude, and confidence. 2. Even a humble wage-earner does not hesitate to entrust his life savings 3. An ordinary person usually maintains an account for security and convenience in settling his bills 4. As for business entities, the bank is trusted to help them in running their affairs, not only in the form of loans, but in their day-to-day transactions like encashing a check.

E. Impressed with Public Interest (Simex vs. CA) a depositor expects a bank to treat his account with utmost fidelity, whether such account consists only of a few hundred pesos or millions. F. Degree of Diligence (Simex vs. CA) Art. 1172 of NCC states that the degree of diligence required of an obligor is that prescribed by law or contract, and in the absence of such, that of a good father to a family NOTE: Due diligence is required of banks extend even to persons or institutions, regularly engaged in the business of lending money secured by real estate mortgage. G. Treatment of Accounts with Meticulous Care There is NO LAW mandating banks to call up their clients whenever their representatives withdraw significant amounts from their accounts. H. Duty to Keep Records 1. Banks shall have a true and accurate account, record, statement of their daily transactions especially those of deposit liabilities. 2. The making of a false entry or willful omission of entries is a ground for the imposition of administrative sanctions and disqualification from office. I. Banks are NOT Gratuitous Bailees Banks solicit deposits in order that they can use the money to gain. J. Banks are NOT Expected to be Infallible, but must bear the blame for NOT discovering mistakes despite established procedures. Q: Sps. A and V opened a joint current account in C Bank with an initial deposit of P2,250. Prior thereto, A had a personal account with the same bank. When the spouse opened their joint current account, the New Accounts teller pulled out the old signature card of A and placed the old personal account number of A in the deposit slip. V issued two checks and one of these was dishonored for IF. They were deducted P20 from their account. The bank tried to call the spouses, but they were in Pampanga. Is the bank liable for damages? A: Yes. - a depositor expects a bank to treat his account with utmost fidelity, whether such account consists only of a few hundred pesos or millions. - Bank must record every transaction accurately - A blunder on the part of the bank such as dishonor of check without good reason can cause the depositor embarrassment, financial loss, and perhaps civil and criminal litigation Note: Exemplary damages are awarded if there is malice and bad faith. K. Dealing with Registered Lands The rule that persons dealing with registered lands can rely solely on the certificate of title does NOT APPLY to banks. Banks should exercise more care and prudence in dealing with registered lands that private individuals, for their business is one affected by public interest.

Q: A sold is unregistered parcel of land to B. Subsequently, an Orig. Cert.Title (OCT) was issued. A surrendered it to X bank as a consequence of a mortgage. B died w/o knowing that an OCT has been issued. Upon learning of his right, C (Bs heir) confronted A and went to X bank. C asked to photocopy the owners duplicate certificate outside the banks premises. C then brought it to the Register of Deeds with the Deed of Sale and he was issued a Transfer Cert of Title. Is the bank liable for damages to A? A: Yes. - Bank failed to foresee the risk of its act of entrusting C with the OCT without notifying A and verifying the veracity of Cs claim and character. - This acts runs afoul of the banks mandate to observe the highest diligence - A has also the right to due process. Notice and hearing are indispensable elements of this right which the bank ignored Q: A bank accepted a property as mortgage despite existence of structures and occupants other than the mortgagor. Is the bank negligent? A: Yes. Banks, being in the business of extending loans, are familiar with the rules on land registration. They are expected to exercise more care and prudence in dealing with registered lands that private individuals, for their business is one affected by public interest. The bank should have conducted investigation since there occupants other than the owner of the land mortgaged. This constitutes gross negligence amounting to bad faith. L. Banks may Exclude Persons in their Premises No employees must be spared by banks and their officers and employees to ensure and preserve the trust and confidence of the general public. IV. Liability For Acts and Employees Bank is LIABLE for the wrongful acts of its officers done WITHIN the scope of their authority. A. Negligence of Manager Bank is liable for the negligence or misdeed of the branch manager since confidence in the banking system necessarily includes reliance on bank managers. (BPI vs. First Metro Investment Corp.) B. Negligence of Officers if within the scope of authority, bank is liable C. Negligence of Tellers returning the passbook ONLY to the depositor or his authorized representative. If given to the wrong person, bank is liable since they would be clothing that person presumptive ownership of the passbook. Note: Appropriation of money by a bank teller is NOT ESTAFA. Such is only MATERIAL POSSESSION. The bank still has JURIDICAL POSSESSION. If for personal gain, THEFT. If the teller has possession of the money since he occupies a position of confidence, QUALIFIED THEFT.

D. Right to Recover from Employees Banks may recover from their employees. (Art. 2181 of NCC) E. Liabilities other than Actual 1. Exemplary by way of example. Malice and bad faith must be attendant 2. Moral when the good reputation of the client was besmirched or his financial credit Note: Banks are NOT responsible for such damages in the ABSENCE of fraud, bad faith, malice, or wanton attitude. F. Respondeat superior, Diligence in the Selection, and Supervision of Employees - A bank is bound by negligence of its employees under the principle of Respondeat superior or command responsibility. V. Classification of Banks (CUT RICO) Sec. 3.2. Banks shall be classified into: (a) Universal banks; (b) Commercial banks; (c) Thrift banks, composed of: (i) Savings and mortgage banks; (ii) Stock savings and loan associations; and (iii) Private development banks, as defined in the Republic Act No. 7906 (hereafter the Thrift Banks Act); (d) Rural banks, as defined in Republic Act No. 73S3 (hereafter the "Rural Banks Act"); (e) Cooperative banks, as defined in Republic Act No 6938 (hereafter the "Cooperative Code"); (f) Islamic banks as defined in Republic Act No. 6848, otherwise known as the Charter of Al Amanah Islamic Investment Bank of the Philippines; and (g) Other classifications of banks as determined by the Monetary Board of the Bangko Sentral ng Pilipinas. A. Business Name - Only a bank that is granted universal/ commercial banking authority may represent itself to the public as such in connection with its business name - Thrift Banks: allowed to use and adopt any name, provide the ff words are affixed: A thrift bank, Saving bank, A Private Development Bank, or A stick Savings and Loan Association - Rural or Commercial Banks: allowed to use and adopt any name, provide the ff words are affixed: Rural or Coop, A Cooperative Bank, or A Rural Bank. o The size of the letters of such phrase shall be at least of the size of the business name when shown on letterheads, billboards, and other advertising materials. B. Universal Banks 1. powers authorized for a commercial bank

2. powers of an investment house 3. power to invest in non-allied enterprises C. Commercial Banks 1. general powers incident to corporations 2. powers of commercial banks: (A BREAD)

Land Bank of the Philippines finance the acquisition and distribution of agricultural estates fro division and resale to small landholders as well as the purchase of the landholding by the agricultural lessee Development Bank of the Philippines was created as Rehabilitation Finance Corp. (RFC); took over the functions of Agricultural Industrial Bank Non-Stock Saving And Loan Associations mean a non-stock, nonprofit corp engaged in the business of accumulating the savings of its members and using such accumulations for loans to members for home building or personal finance Quasi-banks refer to entities engaged in the borrowing of funds through the issuance, endorsement or assignment with recourse or acceptance of deposit substitutes for purposes of relending or purchasing of receivables and other obligations "deposit substitutes" is defined as an alternative form of obtaining funds from the public, other than deposits, through the issuance, endorsement, or acceptance of debt instruments for the borrower's own account, for the purpose of relending or purchasing of receivables and other obligations. VI. Authority to Engage in Banking and Quasi-Banking (QB) Functions A. Authority from Bangko Sentral

I.

D. Rural Banks - designed to make needed credit available and readily accessible in the rural areas on reasonable terms - primary purpose is to meet the normal credit needs of farmers, fishermen, or farm families E. Thrift Banks - include savings and mortgage banks, private devt. banks, and stock savings and loans associations. - Providing short-term working capital, medium and long term financing to business engaged in agriculture, services, industry, and housing - Powers of a Thrift Bank: F. Cooperative Banks - one organized by, the majority shares of which is owned and controlled by, cooperatives primarily to provide financial and credit services to cooperatives - cooperative bank shall include cooperative rural banks - Membership shall include ONLY cooperatives and federations of cooperatives - Functions of a Cooperative Bank

J.

G. Islamic Banks (Al-Amanh Islamic Investment Bank of the Philippines) - in Zamboanga City - primary purpose shall be to promote and accelerate the socioeconomic devt of the Autonomous Region by performing banking and financing operations and to establish and participate in the agricultural, commercial, and industrial ventures based on the Islamic concept of banking. H. Other Banks - Philippine Veterans Bank private commercial bank owned by veterans

No person shall engage in banking operations or QB functions WITHOUT authority from the Bangko Sentral - No articles of incorporation or amendment to articles of incorporation of banks, banking and quasi-banking institutions, building and loan associations, trust companies and other financial intermediaries, insurance companies, public utilities, educational institutions, and other corporations governed by special laws shall be accepted or approved by the Commission unless accompanied by a favorable recommendation of the appropriate government agency to the effect that such articles or amendment is in accordance with law. (Sec. 17 of BP 68) - The Securities and Exchange Commission shall not accept for filing the by-laws or any amendment thereto of any bank, banking institution, building and loan association, trust company, insurance company, public utility, educational institution or other special corporations governed by special laws, unless accompanied by a certificate of the appropriate government agency to the effect that such by-laws or amendments are in accordance with law. (Sec. 46 of BP 68) B. Whether a person or entity is performing banking or quasi-banking functions W/O the BS authority shall be decided by the Monetary -

Board by examining and investigating the books and records of such person or entity. Upon issuance of authority, may commence to engage in functions until authority is suspended, revoked or annulled by BS. C. The dept head and the examiners of the supervising and examining dept shall: 1. administer oath to any such person or entity 2. compel presentation of books, records, and documents a. failure to do so would subject such to appropriate sanctions D. BS shall, when examining a bank, have the authority to examine an enterprise which is wholly or majority-owned by the bank. E. Certificate of Authority to Register - The SEC shall not register the articles of corp or any amendment unless accompanied by a certificate of authority issued by the MB, under its seal. The MB shall be satisfied from the evidence submitted to it: (RPC) o All requirements of law have been complied with o Public interest and economic conditions justify the authorization o The amount of capital as well as the integrity of the organizers reasonable assure the safety of deposits and the public interest The SEC shall not register the by-laws of any bank or any amendment unless accompanied by a certificate of authority issued by the MB, under its seal.

5. Its projected financial condition and capital base C. Capital Requirements 1. Banks shall comply with the required minimum capital by MB: Universal Bank4,950M Commercial Bank2,400M Thrift Banks w/n MM325.0M Outside MM52.0M Rural Banks w/n MM26.0M Cities of Cebu and Davao13.0M In 1st, 2nd & 3rd class cities and 1st class minicipalities6.5M In 4th, 5th & 6th classcities and in the 2nd, 3rd & 4th class municipalities3.9M In 5th & 6th class municipalities- 2.6M 2. At least 25% of the total authorized capital stock shall be subscribed by the subscribers of the propsed bank, and at least 25% of such subscription shall be paid-up that it must not be less than the minimum required capital.

CHAPTER 2: ORGANIZATION, MANAGEMENT & ADMINISTRATION OF BANKS, QUASI-BANKS AND TRUST ENTITIES I. Organization of Banks

D. Incorporators/ Subscribers 1. Must be persons of integrity and of good credit standing in the business community. Subscribers must have adequate fonancial strength to pay for their propsed subscriptions in the bank. 2. Must not have been convicted of any crime involving moral turpitude unless otherwise allowed. 3. A bank may be organized with not less than 5 or more than 15 persons in organizing or investing in the proposed bank. *if there is excess, may be listed among the original subscribers in the Articles of Corp. QUERY: MAY COOPERATIVES ORGANIZE A BANK? Yes, established cooperatives and corporations may organize a bank and/or subscribe to the shares of stock oa any rural bank. Provided, that it shall be subject to special examination and to such rules and regulations prescribed by the MB. E. Bank Branches 1. UB & CB may open branches or other offices within or outside the Philppines upon prior approval of the BS. 2. A bank authorized to branch out shall be responsible for all business conducted in such branches because a bank and its offices shall be treated as one unit.

A. Conditions The MB may authorize the organization of a bank and quasi-bank: 1. Entity is a stock corporation 2. Funds are obtained from the public, 20 o more persons 3. Minimum capital requirements by MB are satisfied B. Capabilities The MB shall take into consideration their apability in terms of their financial resources and technical expertise and integrity. 1. Banks ownership structure 2. Directors and senior management 3. Its operating plan 4. Internal control

II. Stockholdings A. Treasury Stocks 1. No bank shall Purchase/ acquire shares of its own capital stock or Accept its own shares as a security for a loan EXCEPT: when authorized by the MB. -stocks purchased shall be sold or disposed of at a public or private sale. 2. At common law, a coprpration has no lien upon the shares of stockholders for any indebtedness of the corporation. 3. Sec.35 of the US National Banking At of 1864, if banking corporations were given a lien on their own stock for the indebtedness of the stockholders, the prohibition against granting loans or discounts upon the security of the stock would become laregly ineffective. B. Foreign Stockholdings 1. Foreign inividuals an non-bank corporations may own or control up to 40% of the voting stock of a domestic bank. It shall apply t Filipinos and domestic non-bank cprporations. QUERY: PROVISION IS AMBIGUOUS. IF IT APPEARS THAT FPREIGN INDIVIDUALS AND NON-BANK COPORATINS MAY ONLY CONTROL UP TO 40% OF THE VOTING STOCK. ON THE OTHER HAND, FILIPINOS AND DOMESTIC NON-BANK CORPORATIONS MAY ALSO CONTROL ONLY UP TO 40% OF THE VOTING STOCK. WHAT HAPPENS THEN TO THE 20%? - Foreign inividuals an non-bank corporations may own or control up to 40% of the voting stock of a domestic bank Provided, that the aggregate foreignvoting stoks owned by them shall not exceed 40% of the outstanding voting stock of the bank. The percentage of foreign-owned voting stock shall be determined by the citizenship of the individual stockholders in the bank. -Filipino individual and domestic non-bank corporation may each own up to 40% o the voting stock of a domestic bank. There shall be no aggregate ceiling on the ownership by such individuals and corporations in a domestic bank. 2. The percentage of foreign-owned voting stock shall be determined by the citizenship of the individual stockholders in the bank shall follow the citizenship of the controlling stockholders of the corporation, irrespective of the place of incorporation. *CONTROLLING STOCKHOLDER- refer to individuals holding more than 50% of the voting stock of the corporate stockholders of the bank.

3. At least 60% of voting stock of any commercial bank shall be owned by Filipino citizens. For thrift banks, at least 40% of its voting stock shall be owned by Filipinos. In rural banks,all of the capital stock. NOTE: In determining the nationality of banks, the CONTROL TEST is applied. The following tests do not: 1. War-time test 2. Investment test 3. Place of incorporation test 4. Grandfather rule 5. Principal place of usiness test C. Acquisition of Voting Stock in a Domestic Bank 1. Within 7years from the effectivity of the GBL and subject to guidelines issued pursuant to the Foreign Banks Libearlization Act, the MB may authorize a foreign bank to acquire up to 100% of the voting stock of only one bank organized under the laws of the Republic of the Philippines. 2. Within the same period, MB may authorize any foreign bank, which prior to the effectivity of the GBL availed itself of the privilege to acquire upto 60% of the voting stock of a bank under the Foreign Banks Libearlization Act and the Thrift Banks Act, to further acquire voting shares of such bank to the extent necessary for it to own 100% of the voting stock thereof. 3. MB shall adopt measures necessary to ensure that at all times the control of 70% of the resources or assets of teh entire banking system is held by banks which are at keast majorityowned by Filipinos. D. Family Grous or Related Interests 1. Stockholdingsn of individuals related to each other within the fourth degree of consanguinity or affinity, legitimater or commonlaw shall be considered family groups or related interests and must be fullt disclosed in all transactions by such an individual with the bank. 2. Two or more corporations owned or controlled by the same family group or same group of persons shall be considered related interests and must be fullly disclosed in all transactions by such corporations or related groups of persons with the bank.

III.

Board of Directors

A. Number of Directors 1. Shall be at least 5, an a maximum of 15 members of the board of directors of bank, 2 shall be independent directors. (except) -all be of legal age

-majority are residents of the Phil. -form a private corporation for any lawful purpose 2. INDEPENDENT DIRECTOR- mean a person other tha an officer or employee of the bank, its subsidiaries or ffiliates or related interests. *Non-Filipino citizens may become members of the bord of directors of a bank to the extent of the foreign participation in the equity of said bank. a. not or has not been an officer or employee of the bank/quasibank/trust entity, its subsidiaries and affiliates or related interests during the past 3 years conted from the date of his election b. not a director of officer of related companies of the institutions majority stokholder c. not a majority shareholder of the institutions, any of its related ompanies or of its majority shareholder d. not a relative w/n 4th degree of consanguinity or affinity, legitimate or common law of any director,oficer or majority shareholder of the bank/quasibank/trust entity, its subsidiaries and affiliates or related companies e. not acting as a nominee or representatve of any director or substantial holder f. free from any business or other relationship which could materially interfere with the exerise of his judgment B. Directors of Merged or Consolidated Banks The number of directors shall not excedd 21. C. Meetings 1. May be conducted throuh modern technologies such as teleconferencing and video-conferencing *Banks shall include in theor bylaws a provision taht meetings of their board of directors shall be held only within the Philippines. 2. Corporate officers, quorum: Immediately after election, directors must formally organize the election of the a. president who shall be thedirector b. treasurer, who may or may not be a director c. secretary who shall be a resident nd citizen of the Philippines d. other officers provided for in the by-laws *Any 2 or more positions may be held concurrently by the same person EXCEPT that no one shall act as a president and secretary or as president and treasurer at the same time.

*Directors or trustees cannot attend ot vote by proy at board meetings. D. Compensation and other Benefits of Directors and Officers 1. MB may regulate the payment by the bank to its deirectors and officers of compensation, allowance, fees, bonuses, stock options, proit sharing and fringe benefits only in the exceptional cases and when the circumstances warrant, such as but not limited to the following: a. When a bank is under comptrollership or conservatorship b. When found by the MB to be conucting business in an unsafe or unsound manner c. When found to be an unsatisfactory financial condition. 2. REMEDY: Sec.30 of the Corporation Code Directors shall not receive any compensation except for reasonable per diems. Provided, taht any such compensation other than per diems maybe granted to directors by the vote of the stockholers representing at least a majority of the outstanding capitl stock at a regular or special stockholders meeting. It shall not exceed 10& of the net income before income tax of the corporation durng the preceeding year. IV. Fit and Proper Rule

A. Powers of the MB 1. To maintain the quality of bank management and afford better protection to depositors and the public in general. -MB shall prescribe,pass upon and review the qualifications and disqualifications of individuals elected or appointed bank directors or officers and disqualify those found unfit. 2. After due notice to the board of directors of the bank, the MB may disqualify, suspend or remove any bank director or officer who commits or omits an act which render himunfit for the position. 3. If found fit and proper, shall be given to his integrity, experience, education, training and competence. B. Disqualification a. Permanently Disqualified Directors 1. Have been convicted by final judgment of a court for offenses involving dishonesty or breach of trust (ex. Estafa, extortion, forgery, malversation, swindling, BP22)

2. Have been convicted by final judgment of a court sentecing them to serve a maximum term of imprisonment of more than 6 years. 3. Have been convicted by final judgment of a court for violation of banking laws, rules and regulations 4. Those who have been judicially declared insolvent, spendthrit or incapacitated to contract 5. Those directors, officers or emplyees of banks, quasi anks or trust entities who were found to be culpable for such institutions closure 6. Those directors, officers or emplyees of banks, quasi anks or trust entities who were found by the MB as administratively liable for violation of banking law, rules an regulaitons 7. Those directors, officers or emplyees of banks, quasi anks or trust entities who were found to be unfit for the position of directors nad officers b. Temporarily Disqualified Directors: 1. Person who refuses to fully disclose the extent of their business interests to the appropriate suoervising and examining department. 2. Directors who have been absent or who have not participated in more than 50% of all meetings, both regular and special, and those who failed to physically attend at east 25% of all meetings in an year except those with notarized certification executed by the corporate secretary. 3. Persons who are deinquent in the payment of their obligations: a. DELINQUENT IN THE PAYMENT OF OBLIGATIONS- an obligation of a person with a bank/quasibank/trust entity where he is a director or officer, or at least 2 obligations with other banks/financial institutions, underdifferent credit lines or loan contracts, ar past due. b. Obligations shall include all borrowings from a bank/quasibank obtained by: 1. Director or officer for his own account or acts as guarantor, indorser or surety of loans 2. The spouse or child under the parental authority of the director or officer 3. Any person whose loan proceeds were credited to an acount for the benefit of a director or officer. 4. His spouse is the managing partner or a general partner owning a controlling interest in the partnership 5. A corporation, association or firm whollyowned by any group of persons

4. Have been convicted by final judgment of a court for offenses involving dishonesty or breach of trust (ex. Estafa, extortion, forgery, malversation, swindling, BP22) 5. Directors of officers of closed banks/quasibanks/trust entities pending their clearance by the MB 6. Directors disqualified for failure to observe/discharge their duties & responsibilities 7. Directors who failed to attend the special seminar for board of directors 8. Persons dismissed/terminated from employment for cause. 9. Those under preventive suspension 10. Persons with derogatory records as certified by, or on the official files of, the judiciary, National Bureau of Investigation, Philippine National Police, quasi judicial bodies. 11. Those are administratively liable for violation of banking laws, rules and regulations. 12. Any person found by MB to be unfit for th position of directors or officers. 13. When penalty is suspension from office or fine is imposed, such is found to be administratively liable. C. Disqualification/ Prohibitions under the Corporation Code Sec.27. No person convited by fianl judgment of an offense puishable by imprionment for a perios exceeding 6years or a violation of this Code within 5years prior to date of is electiom or appointment shall qualify as a director, trustee or officer of any corporation. D. Disqualification? Prohibitions under NCBA

V.

Banking Days and Hours A. Number of Days and Hour 1. Shall transact business on all working days for at least 6 hours a day, even before 8am or after 8pm. May open for business on Sat, Sun or holidays for at least 3 hours a day. 2. If so, must repot to the Bangko Sentrl the additional days 3. Working days mean Mon-Fri excpet holidays. 4. Branches at international airport or major fish port are allowed to operate on flexible banking hours provided hat wil inform BSP of the schedule of the banking hours that is not less than 6 hrs a day.

VI.

Automated Teller Machines

A. Off-ite Automated Teller Machines (ATMs) 1. Must submit a report to the appropriate department of the BSP on ATMs which they establish 2. Shall be installed only in the centers of activity like shopping, supermarkets, hospitals, university campuses. Provided, that adequate internal control and security measures shall be adopted nd submitted to BSP. 3. Must comply with these, to all to open off site ATMS. B. Mobile ATMs 1. Should allowed to visit only centers of activity and should confine their itinerary to Metro Manila until futher notice. 2. Shall secure insurance coverage or adopt a selfinsurance scheme to protect itself against losses of whatever nature in ita mobile ATM oprations 3. Banks hall notify the supervising and examining department of the BSP of the tual date a mobile ATM become oprational and when terminated. VII. Independent Auditor 1. MB shall require a bank etc. To engage the services of an independent auditor to be chosen by a bank etc. From a list of certified public accountants acceptable to the MB 2. Term of engagement hall be prescribed by MB, whenther as continuing basis or special engagements. 3. Board of Directors shall also conduct an annual balance sheet audit of the bank etc. To review the internal audit and control system of teh bank etc, and to submit a report of such audit. Financial Statements Every bank etc. Shall submit to the appropriate supervising and examining dept. Of the BSP fianncial statements. It shall be of a specific date designated by BSP and shall show actual financial conditions of the institution submitting the statements, and of its branhes, offices, subsidiaries and affiliates, and shall contain such informations as required in the BSP regualtions.

If there is local emergency or imminent panic, the MB by vote of at least 5 of its members may allow to defer for a stated period of time the publication of the statement of financial condition.

NOTES: page 54-55 (IMPORTANT) IX. Publication of Capital Stock It shll not publish the amount of its authorized or subscribed capital stock without indicating at the same tme and with equal prominence, the amount o its capital actually paid-up. No branch of any foreign bank doing business in the Phil shall in any way announce the amount of the capital and surplus of its had office. Settlement of Disputes BSP shall be consulted by other gov. Agencies in actions and proceedings brought before them involving controversies in banks etc. , as well as disputes between any all or all of them which theya re the directors, officers or stockholders. Strikes and Lockouts A. Unsettles Labor Disputes The banking industry is indispensable to the national interest. If unsettled afer 7 days shall be reported by the BSP to the Sec. Of Labor who may assume jurisdiction over the dispute and decide it or certify the same. The President, may intervene and assume juridiction over suh labor dispute in order to settle and terminate the same. B. Reports of Strikes and lockouts The bank shal disclose pertinent info: 1. Cause of the strike/lockout and bank managements position on its legality 2. Bank oprations affected XII. Laws Governing other Types of Banks Thrift Banks Act, Rural Banks Act, Cooperative Code For Islamic banks- special laws For purposes of prescribing the minimum ration which the net worth of a thrift bank must bear to its total risk assets, the provisions of the Gbl shall govern.

X.

XI.

VIII. -

PUBLICATION: In English or Filipino At least once every quarter in a newspaper of general circulation in the city or province BSP msy prescibe where it shall be published Shall make available to the public an shall prescribe the complete set of its audited financial statements